The law is full of old rituals that today we would consider ridiculous.

For example, in early Bavaria, to convey real property by sale, by gift, or by will, one had to box the ears of young boys to seal the deal. The idea was that by creating a memory of pain in the child, he would be a good witness later in life if a dispute over the transfer ever arose. Without this formality, the conveyance was ineffective, even where the intended recipient took possession of the land and even if no dispute ever arose.

Thankfully today, the law has done away with such silly rituals. There are, however, three formalities you must follow too ensure that your property transfers upon your death in the manner and to the person your intend.

1) You must create a will. Write down all the property you own and to whom it should go upon your death. Without this basic document, all your property will be sent through the probate court and distributed to your heirs through the rigid state laws of intestacy.

2) You must sign your will. In California, this requirement can be filled one of three ways: you may sign the will yourself; your name may be affixed to the will by some other person at your direction and in your presence; or your name may be affixed by a conservator acting under court order.

3) Your will must be witnessed by at least two people. During your lifetime, at least two people who do not stand to inherit must sign your will as disinterested. Furthermore, they must be present and physically watching as you sign the will and they must be competent of the fact that they are signing your will.

If any one of these requirements is not met, the probate court can determine that you died without a valid will and the land that you wanted to go to your grandchildren may instead go to your son with a nasty gambling habit. Of course, there are some exceptions to these rules, but they too throw your intentions to the scrutiny of the court, which costs your estate time and money.

If you have any questions about the validity of your will, I urge you to talk to your estate planning lawyer.

James D. Perry

Late-in-life second marriages are becoming commonplace in American society, and with it, anxiety has been rising among stepchildren. Estate planning lawyers have had to pay greater attention to the particular concerns and needs of blended families because also becoming more common is the courtroom brawls between stepparents and stepchildren and stepsiblings.

The first concern I hear from clients is often related to the financial security of the parents. If Mom moved into Stepdad’s home, what’s to keep Stepdad’s kids from kicking her out of the house if Stepdad were to die first?

The second concern is for the adult children’s prospective inheritance from their natural parent. Many state elective share laws dictate that when a person dies, the spouse naturally inherits a certain share of the estate, which will certainly cut into how much, if any, is left to the decedent’s natural children after the spouse dies.

In California, community property laws can be both a blessing and a nightmare for the adult children of a blended family. On one hand, generally, a surviving spouse doesn’t have a claim over to any property or account kept separately and in the deceased’s name.

However, any property that was held jointly (i.e., homes, common bank accounts) is presumed to be community property and, unless that presumption is rebutted in court, it passes entirely to the surviving spouse. And, even separate property may pass in whole or in part to the surviving spouse if the deceased partner leaves no will.

Older adults bring a greater amount of personal wealth into new relationships and, experts say, they are more practical about the financial realities their late-in-life marriage presents.

A prenuptial or postnuptial agreement can keep Mom in the house owned by Stepdad until her death at which point it passes solely to his children. Keeping property separate in trust accounts can prevent it from being transmuted into community property. And a clause inserted into Dad’s will can ensure that the separate property in his name passes to his children, not his spouse upon his death.

After you die, you could either be rolling in your grave because of the nasty legal battle you left your blended family or resting in peace.

James D. Perry

My wife and I are off to Vermont, New Hampshire and Maine for vacation before the summer days slip away.    I’ve left instructions with my capable staff on when and how to contact me if needed, with any luck they will be able to get by just fine without me for a couple of weeks.  It would be horribly irresponsible of me to not just show up on Monday morning without telling them or my clients that I will be away.

But what if I don’t come back?   What if I choke on a lobster tail or have the big one whilst trolling for trout on Lake Winamasake?   Well, all of you that were counting on me to help you with your estate plan are just going to have find help or a referral from my staff.   And let’s be clear:  you, like me and everyone else, are going to die.

You really have to come to grips with this concept before you make out your estate plan because death is not the last thing you will ever do.   Distribution of assets is the true final act, and since you’re not going to be around to do it, you need your own capable staff to carry out your business.

That staff is your estate plan.  Your will covers the “what” and “to whom” of asset allocation, and any trusts you create handle the “when” and “how.”

Once death occurs, planning pays off for your heirs if done right.  Other than state law, your estate plan is the only roadmap a probate judge, or your trust attorney can use to settle your estate.  And state laws don’t discriminate based on your spendthrift kids, your no-good brother, or your favorite niece.

Hopefully, I will eventually return safe and sound to my office in September and be available to settle any unresolved issues that came up during my vacation.

If I don’t come back, at least I know my own estate plan is complete.  If yours isn’t, get to it before that banana peel trips you up!

James D. Perry

One of my clients is an avid stamp collector. He has decided that upon his death, his modest collection will go to his granddaughter who grew up learning about and loving his hobby during their summers together.

Individuals pass more to their heirs than just real estate and money – a significant portion of wealth that is inherited comes in the form of art, jewelry, heirlooms and collections.

The difficulty in determining the value of these items and the fluctuations in tax law between this year and next are proving to be tricky for estate planning and estate settlement.

If an inherited asset that is appreciated in value is sold, the profits likely are subject to the capital gains tax. In previous years, capital gains taxes were measured based on the value of the item at the time of the of the original owner’s death under a step up in cost basis.

But, because the step up in cost basis has been suspended this year along with the estate tax, the capital gains tax against 2010 heirs will be measured based on the original owner’s purchase price – not the item’s current value – unless the estate’s executor includes that item as part of the $1.3 million step up that all estates get.

This could be a valuation and tax nightmare for my client’s granddaughter should my client die in 2010. The capital gains tax for collectibles is 28 percent. And many rare objects will require evidence of provenance and proof that taxes were paid on previous sales.

If you have rare collectibles or heirlooms that you intend to pass on, have the items appraised (every five years is recommended) and keep any papers of provenance and purchase in an accessible file. With the return of the estate tax in 2011, you might also consider donating rare collectibles to a museum or other charity, which would allow you to deduct a portion of their value from your estate leaving more to your heirs.

My client’s collection likely holds more sentimental value for his granddaughter than economic, but her grandfather’s pride in his stamps and meticulous record-keeping will protect her from terrible tax confusion when his collection finally becomes hers.

James D. Perry

There are a number of mistakes one can make in financial gifting and distributing assets among heirs. Being aware of the most common problems and addressing them in creating your estate plan can make for a smoother transition of assets.

Timing your gift to you heirs can be very important. If you leave money to a young person, as I’ve written before, you don’t want to give too soon. Financial maturity does not necessarily coincide with age.

But, if you give too late, or neglect telling your heirs of their forthcoming inheritance, you put them at a financial disadvantage. Inheriting sooner through lifetime gifting, or having knowledge of a planned inheritance might change their financial decisions or present to them opportunities that otherwise might pass by.

When you do give, you also need to consider the amount you’re giving. Giving too much may do your heirs more harm than good. There are tax benefits as well as life lessons you may pass on by sharing the wealth among other beneficiaries or by giving to charity.

If you’re planning to leave unequal amounts to your children, proceed with caution. Unequal inheritances – even where one child is more prosperous than another – can create animosity between siblings that may last through their lifetimes and future generations.

However, in an attempt to prevent these problems, you also don’t want to put in place so many controls that you stifle your heirs and the control they have over their inheritance. A trust can be structured with controls and incentives, though, that can help eliminate many of the previously mentioned problems.

Make sure you’re getting good estate planning advice from an estate planning attorney or financial planner, and avoid these common pitfalls.

James D. Perry

With wills and trusts, people tend to “set it and forget it.” But it’s important to revisit your will and trust documents at least every five years, or whenever there is a major life event – new children, new son or daughter in law, new grandchildren, divorce, remarriage, new property, etc.

Guardianship appointments should be current if you have minor children so that you can designate who will care for them if you die.

Your beneficiary designation forms determines who will get your insurance and retirement accounts. This too, should be updated periodically. If you named a sibling or your parents as your beneficiary when you were younger on these forms, you might now want to make sure they go to your spouse or children instead. Many people aren’t aware that these forms override stated wishes in your will so you should consider these documents in tandem to prevent confusion.

Keep all these documents in a safe place – a fire-proof safe, a clearly marked file in your file cabinet, a shared folder on your home computer, or ask your lawyer to hold on to them – and make sure your loved ones know where they can find them if and when they need them.

In a medical emergency, or in moments of mourning, you will not want your family and friends to be in a frenzy when all they want is to honor your wishes and your memory.

If you haven’t started any of these documents, you should immediately create a balance sheet that lists the basic information about your assets and schedule an appointment with your estate-planning attorney as soon as possible.

James D. Perry

At the end of May, parties claiming deceptive business practices by LegalZoom filed a class action lawsuit in California against the online legal document preparation service. They argue that LegalZoom’s advertisements give consumers “a false sense of security that people do not need hire a traditional attorney.”

In July 2007, Anthony Ferrentino asked his niece, Katherine Webster, to help him use LegalZoom to prepare a will and living trust. But, when Katherine went to transfer her uncle’s assets into the trust, she found that the financial institutions that held his money refused to recognize the LegalZoom documents as valid. Katherine tried to get help from LegalZoom’s customer service representatives to no avail, and the trust was still not funded when Anthony died in November 2007.

Katherine is now one of the plaintiffs in the suit against LegalZoom suing on behalf of herself and on behalf of anyone in California who paid LegalZoom for a living trust, will, advance directive for health care, or power of attorney.

The internet has brought a lot of convenience to our lives with its wealth of information, online shopping, and the ease of staying connected to our loved ones. But sometimes convenience means cutting corners, and the one area you don’t want to cut corners is in protecting your loved ones and your property.

These legal document preparation services are not the same as going to an actual attorney, but they do not clarify that in their user agreements. And, customer service representatives may look over your documents, but they cannot dispense legal advice, identifying problem areas or correcting mistakes. The documents are customized with your personal information, but they are not tailored to your needs.

After her uncle’s death, Katherine hired an estate planning attorney to petition the court to allow the post-death funding of the trust and to convince the banks to transfer the funds. The attorney also discovered that Anthony’s will was never properly witnessed.

Correcting the mistakes ended up costing Anthony’s estate thousands of dollars. Doing it right the first time would have saved time and money, and a lot of emotional stress. In the end, the “convenience” simply wasn’t worth it.

James D. Perry

In this digital age, you probably have at least one email account. Perhaps two. And maybe a Facebook page to keep in touch with your grandkids, and a LinkedIn account to stay networked with your professional colleagues. You might even have a blog.

What will happen to all that online information after you die? To the account holder’s benefit, many sites refuse to grant access to anyone other than the account holder. Or, the companies have cumbersome hoops for heirs to jump through to gain control of those accounts, which might include getting a court order. And, the government has very little regulation stipulating how online accounts are to be disposed of upon the account holder’s death.

You will first want to inventory your digital assets: you email accounts, blog, social media and networking accounts (Facebook, Flickr, Twitter, LinkedIn, etc.), and any information stored on employer intranets or computers.

Then, determine the worth, if any, of your digital property. A popular blog or Twitter account with many followers may be worth money. Computer files of your manuscript about the history of railroads, or your ornithological research may have educational value. Photographs and other personal assets may or may not have monetary value, but they almost certainly have significance to your heirs.

Most of us fiercely guard our passwords and account information because of warnings against hackers, viruses, and identity theft. But once you’ve listed all your accounts, you need to decide who will be in charge of each of them (or all of them).

Then, write out your instructions and keep them with your estate planning documents. Otherwise, the decision may end up in the hands of the courts or the website administrators.

James D. Perry

My profession is estate planning. Clients come to me for help on how to preserve their life’s accumulations of wealth and how to pass it on to their loved ones.

What I do for a grandfather and grandmother through legal documents will hopefully convey through transfer of financial assets, a lasting memory of their love and appreciation in the eyes of their children and grandchildren.

But the greatest material wealth my clients possess is not nearly as vast as the richness of knowledge, morals, and wisdom that they hold in their hearts for their families.

A person’s legacy is not solely in the assets they leave behind, and one tradition dating back to biblical times – the ethical will – lives on to provide a vehicle for an individual’s intangible fortune.

An ethical will, or legacy letter, is a document designed to pass on ethical values or life lessons from one generation to the next. It is drafted by you, not me or any other attorney. There are examples of early ethical wills written throughout the Christian Bible, the Jewish Torah, and they are even contained in the oral traditions of Native Americans.

Ethical wills often contain meaningful family stories, personal values and beliefs, statements of faith, blessings, advice, and expressions of love. They may even share regrets, apologies, and final requests. There are no rules or laws about the length or content of an ethical will. It can be a few lines, or paragraphs or many pages in length…this is a case where it really is the thought that counts.

Your ethical will may be kept in a separate document with your last will and testament. However, as much as you hope your heirs follow your sage words and honor your legacy, there is no binding legal authority behind the contents of your ethical will.

Every ethical will is unique. And, while there is no standard format for writing one, there are resources available (books, audio CDs, DVDs and podcasts) to help you write your own.

I urge you to provide for the security of your family by crafting a solid estate plan. But, I also encourage you to be just as generous with your life experiences and values, leaving your loved ones more than just your material possessions.

James D. Perry

In 2008, the federal government collected in excess of $25 billion on individual estates via the estate tax, sometimes called the “death tax.” It’s been six months since the tax lapsed as part of legislation enacted under President George W. Bush in 2001.

Now, the death of one American billionaire, oil magnate Dan L. Duncan, is casting a spotlight on how much the federal government is not collecting.

Duncan’s fortune was estimated to be worth $9 billion, ranking him as the 47^th wealthiest person in the world. Had he died in December 2009, any part of his estate not left to his surviving spouse would have been taxed at a rate of at least 45 percent – at most, $4 billion for the federal government.

The House and Senate failed to come to any consensus last year on legislation that would have prevented the repeal. But, the Senate Finance Committee wants to reinstate the estate tax – the only question being whether the final legislation on the matter will include provisions to collect on the estates of those who have already died this year.

Advocates of the tax point out that the U.S. is home to more than 50 of the world’s billionaires over the age of 80, and claim that the repeal amounts to an unconscionable tax break for the ultra-wealthy in very lean times and historical income disparity. Opponents argue that the tax is unfair because it taxes the same income twice – once when it is earned and again when it is passed on to heirs.

Lawyers agree that any attempt to apply the tax retroactively to the Duncan estate will be met with well-funded legal opposition and arguments that a retroactive tax is unconstitutional.

Congress has another six months to figure out what to do with about Tax-Free 2010. The tax returns at a rate of 55 percent in January 2011.

James D. Perry